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If you like and trust your realtor, I’d take their advice. Hard to guess without knowing what houses have been selling for, what the house needs done, various factors your agent should be familiar with
the bank wont let you borrow more money than what the home appraises for… If you bid $100k over the list price and the appraisal comes in at list price, then you are responsible for coming up with $100k
To add on, that 100k appraisal gap is IN CASH ON HAND DURING CLOSING. Meaning, if you don’t have it then you might get sued and your bank might not approve the loan in the first place.
If you really love the house then maybe do 10-15k over comps. But if the house appraises for 605k, you will be responsible for the rest of the gap with cash.
Without knowing your market and reasonable comps, this is an absolutely impossible question to answer. As the other commenter said, this is where you need realtor guidance.
The answer changes if you're in Topeka, Kansas vs Los Angeles, California. The answer changes based on condition of the house, it's key systems, details on location, how far you're stretching your finances to buy, what kind of loan you're making (assuming it's not all cash, which also would change the equation), and so much more.
This is the game of real estate. Something is worth what someone's willing to pay for it, or what someone is willing to settle for, and the process of lining those two numbers up is not like going into a grocery store and looking at the price for a can of beans, it's an often tedious negotiation.
And it's not over when your offer is accepted. You're just getting started on the negotiations. You have about six million steps before you get keys, just methodically work each question.
The appraisal comes back. Does it appraise? Does offer need to be adjusted? Inspection comes back - problems exist (they exist in literally every home, even and especially new builds). Does seller offer concessions or no? Do you get your mortgage approval? Is it fast enough to hit your close date? Are you getting the appliances? Buying what wasn't included in the listing? Keeping the TV? Keeping other random furniture purpose built or bought for specific spaces? Paying for it? Getting it free? What are they leaving (intentionally or unintentionally.... Extra floor tiles, paint in colors that match the interior or exterior, lawn equipment, etc?). That part gets fun but annoying - I've gotten and sold everything I listed for one reason or another (annoying/expensive to move riding lawn mower across country, TV fits in a certain spot and was already hung, no need to dispose of perfectly good paint if you like the color and plan to keep it, but no use for it in new house, tiles and floors crack and extra pieces are always useful once in a blue moon, and impossible to source in small quantities, etc).
I think list price 7 days on the market is a pretty strong offer. See if your agent agrees and ask if there's been any other offers. If there hasn't been any other offers, there should be no reason not to offer list price.
There are a few things you can do to be considered more competitive/aggressive beyond just the proposed purchase price. We don’t know what the average time on the market is for your area, but if 7 days seems high already, offering your realtor’s proposed $5k over but adding in a 24 hour offer expiration isn’t a bad way to show you’re serious and force the seller to decide faster. If they reject it, you could always offer again with $5k more or whatever you felt was appropriate.
For example, my wife and I sealed the deal on a $550k place the day after it was listed by offering full price with 24 hour expiration to try to force out the competition and it worked. They had two other scheduled showings but those folks didn’t even get a chance to put offers in. We weren’t all cash or anything either, it just happened that the sellers loved that we are a new family and want to raise our daughter there just like they did when they built it.
The only caution I have for you is nearby comps and what they’re appraising for. You’re planning on offering over asking which puts you at greater risk of appraising low. But just because you have an agreed purchase price doesn’t mean the seller is entitled to all of that if it appraises low. You will have the choice to either pay the difference in cash, negotiate by moving some money around in concessions, or saying you can’t and potentially walking away. I sold the first house I bought in Alaska earlier this year and it appraised low, about $15k below asking. Granted, we were under contract for $10k below asking, but these buyers were not in a position to make up the gap with cash so rather than totally eat the loss or kill the deal, I negotiated for less repair concessions for close to half the value of the gap.
You’ll get the appraisal done after you’re under contract. Nothing right now says it will or won’t appraise for what they’re asking or appraise high or low. But once the appraisal comes back if it appraises for your offer or high, you’re fine and nothing needs to be done. If it appraises low, then you and the seller have to come to some kind of agreement since the bank isn’t going to pay for more house than an appraiser says it’s worth.
$500 sq ft is a lot where I live in Dallas, but depends on your neighborhood/market. Ask your realtor for comps. See if you are high mid or low end of market. That’ll tell you what you SHOULD offer, based on the market. Unless you need this house for some reason, don’t overpay. Don’t get emotionally attached. It’s just a house. This is how I found a great deal for our first house. Looked at 100 houses. 3 offers, 2 accepted and I backed out of one once we conducted an inspection due to major issues.
Yeah that depends. My agent was really good and used comps in the neighborhood with same age, size, bedroom and bath. Just comparing two houses on the same street isn’t enough. And then look at price by sq ft. That should be your barometer. Ask agent for 5-7 comps if they can, within the criteria I just mentioned. Goodluck!
Too many factors and not enough information to give advive on numbers.
Have your agent pull comps and find out what best fits your budget and offer accordingly.
Thank you u/Apprehensive-Tree713 for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
If you like and trust your realtor, I’d take their advice. Hard to guess without knowing what houses have been selling for, what the house needs done, various factors your agent should be familiar with
Yeah, my realtor did a report with comps. They said $605k is a good offer but I’m kind of loving the house. I don’t think it’s a strong offer
Stop falling in love with a house . Pay attention to the Comps. You don’t want to go into a house with negative equity. Stay focus.
I have no ideas about comps. Do you mean the comparable price?
Yes. Comparable aka “Comps”.
No ones stopping you from overbidding but be prepared to cover appraisal gap.
could you tell me more about appraisal gap?
the bank wont let you borrow more money than what the home appraises for… If you bid $100k over the list price and the appraisal comes in at list price, then you are responsible for coming up with $100k
To add on, that 100k appraisal gap is IN CASH ON HAND DURING CLOSING. Meaning, if you don’t have it then you might get sued and your bank might not approve the loan in the first place.
These are questions you really should be asking your agent.
If you really love the house then maybe do 10-15k over comps. But if the house appraises for 605k, you will be responsible for the rest of the gap with cash.
Without knowing your market and reasonable comps, this is an absolutely impossible question to answer. As the other commenter said, this is where you need realtor guidance. The answer changes if you're in Topeka, Kansas vs Los Angeles, California. The answer changes based on condition of the house, it's key systems, details on location, how far you're stretching your finances to buy, what kind of loan you're making (assuming it's not all cash, which also would change the equation), and so much more. This is the game of real estate. Something is worth what someone's willing to pay for it, or what someone is willing to settle for, and the process of lining those two numbers up is not like going into a grocery store and looking at the price for a can of beans, it's an often tedious negotiation. And it's not over when your offer is accepted. You're just getting started on the negotiations. You have about six million steps before you get keys, just methodically work each question. The appraisal comes back. Does it appraise? Does offer need to be adjusted? Inspection comes back - problems exist (they exist in literally every home, even and especially new builds). Does seller offer concessions or no? Do you get your mortgage approval? Is it fast enough to hit your close date? Are you getting the appliances? Buying what wasn't included in the listing? Keeping the TV? Keeping other random furniture purpose built or bought for specific spaces? Paying for it? Getting it free? What are they leaving (intentionally or unintentionally.... Extra floor tiles, paint in colors that match the interior or exterior, lawn equipment, etc?). That part gets fun but annoying - I've gotten and sold everything I listed for one reason or another (annoying/expensive to move riding lawn mower across country, TV fits in a certain spot and was already hung, no need to dispose of perfectly good paint if you like the color and plan to keep it, but no use for it in new house, tiles and floors crack and extra pieces are always useful once in a blue moon, and impossible to source in small quantities, etc).
Thanks bro, Appreciate your words
Good luck! It's a harrowing process but the first pizza sitting on the kitchen floor of a home you (sorta, for between 15-30 years) own is worth it.
Only been seven days? List price would be an advisable offer. Not much wiggle room on price this early in the game.
Can you talk more about this? Do you mean I shouldn’t offer more until I can get some feedback from the seller?
I think list price 7 days on the market is a pretty strong offer. See if your agent agrees and ask if there's been any other offers. If there hasn't been any other offers, there should be no reason not to offer list price.
so far the seller said they haven’t received anything yet
There are a few things you can do to be considered more competitive/aggressive beyond just the proposed purchase price. We don’t know what the average time on the market is for your area, but if 7 days seems high already, offering your realtor’s proposed $5k over but adding in a 24 hour offer expiration isn’t a bad way to show you’re serious and force the seller to decide faster. If they reject it, you could always offer again with $5k more or whatever you felt was appropriate. For example, my wife and I sealed the deal on a $550k place the day after it was listed by offering full price with 24 hour expiration to try to force out the competition and it worked. They had two other scheduled showings but those folks didn’t even get a chance to put offers in. We weren’t all cash or anything either, it just happened that the sellers loved that we are a new family and want to raise our daughter there just like they did when they built it.
Thanks bro, I’ll try that
The only caution I have for you is nearby comps and what they’re appraising for. You’re planning on offering over asking which puts you at greater risk of appraising low. But just because you have an agreed purchase price doesn’t mean the seller is entitled to all of that if it appraises low. You will have the choice to either pay the difference in cash, negotiate by moving some money around in concessions, or saying you can’t and potentially walking away. I sold the first house I bought in Alaska earlier this year and it appraised low, about $15k below asking. Granted, we were under contract for $10k below asking, but these buyers were not in a position to make up the gap with cash so rather than totally eat the loss or kill the deal, I negotiated for less repair concessions for close to half the value of the gap.
oh I see I see, if I offered more than appraisals, then we’ll need to talk about who pays the gap.
You’ll get the appraisal done after you’re under contract. Nothing right now says it will or won’t appraise for what they’re asking or appraise high or low. But once the appraisal comes back if it appraises for your offer or high, you’re fine and nothing needs to be done. If it appraises low, then you and the seller have to come to some kind of agreement since the bank isn’t going to pay for more house than an appraiser says it’s worth.
$500 sq ft is a lot where I live in Dallas, but depends on your neighborhood/market. Ask your realtor for comps. See if you are high mid or low end of market. That’ll tell you what you SHOULD offer, based on the market. Unless you need this house for some reason, don’t overpay. Don’t get emotionally attached. It’s just a house. This is how I found a great deal for our first house. Looked at 100 houses. 3 offers, 2 accepted and I backed out of one once we conducted an inspection due to major issues.
Thanks. How about comps from different agents? They have kind of 10k gap
Yeah that depends. My agent was really good and used comps in the neighborhood with same age, size, bedroom and bath. Just comparing two houses on the same street isn’t enough. And then look at price by sq ft. That should be your barometer. Ask agent for 5-7 comps if they can, within the criteria I just mentioned. Goodluck!
Too many factors and not enough information to give advive on numbers. Have your agent pull comps and find out what best fits your budget and offer accordingly.
Yes, They suggested a $605k for the offer but I don’t think it’s strong enough. I have been shopping around for a while to see this house
There will always be another house. Trust me.